A lot of twenty-year-olds think that they are too young to start saving for their retirement. However, if people who fall within this age range start saving from now, they will have enough money to live comfortably by reaching their retirement age. That being said, this process certainly demands planning and a foolproof strategy. On that premise, the following article unveils some of the best retirement strategies for those in their twenties.
The 401(k) plan
The 401(k) plan is a retirement account sponsored by the employer and allows the employee to invest a percentage of his or her salary before tax for retirement. Many workers view this plan as a huge benefit of a job and depend on the funds that they invested in supporting themselves in their retirement years.
The IRA plan
The IRA, which stands for an individual retirement account, allows individuals to save money for their retirement years on a tax-deferred basis. With the IRA plan, the individual has more control over the funds they invested as the plan does not go through the company employer. That being said, if the company does not offer a match, the individual should reach an upper limit with their IRA plan and invest the remaining funds into the 401(k) account.
Save money automatically
Another way to save money for the retirement years is automatically withdrawing money from the individual’s salary into the IRA or 401(k) account. This strategy is great as it certainly helps individuals be disciplined.
Keeping cash on the side
As individuals cannot withdraw funds from their accounts without paying harsh penalties, it is better to set an emergency fund outside of the 401(k) or IRA accounts to pay for urgent expenses. A lot of experts recommend that individuals save funds that allow them to survive three to six months.
Experts also recommend that individuals start investing aggressively from a young age. This strategy will undoubtedly help them when the market takes a loss in a short period of time.